Egyptian Council for Sustainable Development. Trade Mission to Georgia & Armenia. May 28 June 3

Transcription

1 Egyptian Council for Sustainable Development Trade Mission to Georgia & Armenia May 28 June 3 1

2 Egyptian Council for Sustainable Development Formation and Objectives: (ECSD) Due to the success achieved by the Canada Egypt Business Council in contributing towards enhancing the bilateral trade relations, this led to being approached by several entities, organizations and embassies of some countries suggesting cooperation in similar formats where mutual business strategies may offer maximum returns to the sharing parties. From here the initiative originated and the Egyptian Council for Sustainable Development ECSD was launched in 2013 as a non-for-profit NGO committed to foster the relations between Egypt and other countries, especially those which do not have joint business councils with Egypt. This newborn Council aims at opening nontraditional markets before the Egyptian products through organizing promotional missions, holding meetings and events to revitalize investments hence support Egyptian exports and raise growth rates. ECSD will help its members discover and penetrate these promising markets and through its activities it will act as a catalyst for transformation in international trade and investment relations with Egypt. ECSD Activities: Events: ECSD hosts more than 12 monthly events throughout the year presenting a great networking opportunity to interact with prominent figures from different business sectors. Events include luncheons, dinners and roundtable discussions. Business and economic conferences or breakfast briefings can be organized on the occasions of visiting dignitaries and officials to Egypt to meet with government officials and the business community. 2

3 Foreign Delegations: ECSD is delighted to meet and organize for events with different delegations visiting Egypt. Upon coordinating with related embassies, ECSD can organize those events with an aim to increase trade and investment opportunities as well as providing awareness and exploring new business opportunities One on One Business Meetings: ECSD can work closely with the related embassies to hold one-on-one business meetings, with premium business counterparts. Those meetings serve to introduce new companies to rapidly expanding business markets, presenting the private sector s business visions and exploring potential areas of cooperation. Trade Missions: ECSD Trade missions to other countries represent a cornerstone of ECSD s proactive approach. The missions corporate Egyptian businessmen/women of different sectors, also representatives of different concerned ministries and government officials. The goal of our missions is to portray the business atmosphere in Egypt to the other side, and vice versa, attempting to find ways to increase bilateral trade. Trade Missions Objectives: Update the government officials, policy makers, think tanks as well as the business community in the visited countries with the recent economic, administrative and political changes taking place in Egypt in an attempt to explore potential sectors of cooperation. Promote Egypt s success pillars and recent government incentive packages to support investment in Egypt in light of the global economy changing parameters. Exchanging experience with the counterparts in the visited countries. Developing a positive exchange of culture and research to boost trade and investment relations. 3

4 First Destination: Georgia May 28 June 1 General Overview: 4

5 South Caucasus Pipeline (also known as: Baku Tbilisi Erzurum Pipeline) Gas pipeline-692 kilometers long, capacity 8.8 billion cubic meters. Second stage of the Shah Deniz development capacity, 25 billion cubic meters (about 5-6% of EU consumption) North-South Pipeline Gas pipeline-capacity 20 billion cubic meters per annum. Baku Tbilisi Ceyhan pipeline Oil pipeline-1,768 kilometers long, capacity 50 million metric tons per annum (1 million barrels per day) Baku Supsa Pipeline (also known as the Western Route Export Pipeline and Western Early Oil Pipeline) Oil pipeline-833-kilometers long, capacity 52 million barrels annum, with proposed upgrades to between 110 million to 215 million barrels per annum 5

6 BAKU-TBILISI-KARS Railway Project Georgian Railway Modernization Project East- West and North-South Highway modernization 6

7 Points on Economic Policy: The efforts of the Georgian Government are focused on delivering of results of the economic growth to the majority of Georgian citizens. The economic policy of the Georgian Government is oriented on free, fair, inclusive and sustainable development. It is based on the fundamental principles of economic freedom, protection and respect of private property. The Georgian economic policy is guided by the principles of social security and social justice. Creation of new employment opportunities is supplemented by the inclusive and affordable systems in the field of education, healthcare and social insurance. A comparatively small, efficient and transparent governmental structure works hard in order to ensure free and fair environment for the private sector. Governmental involvement in the economy is limited only to those spheres in which private sector demonstrates weakness and inefficiency. Financial transparency, minimization of country s financial risks and maintaining the stabile financial system in the country are addressed at the first place. We also make special focus on promotion of innovations and improvement of entrepreneur capacities. A special structure, an Agency for Innovation and Technology has recently been established (Before this service was operating under the Ministry of economy). The wave of the reforms, started in 2004, in particular, minimization of the number of licenses, permits and taxes significantly liberalized the Georgian market. The state investments in infrastructure projects became main driving force for the instant growth. However, significant violations with regards to property rights undermined the efforts. Elite corruption intertwined with tough state control and interference in activities of local businesses had, literally, thrown the economy over the verge of the crisis (this point has to be used accordingly). The judicial system in Georgia is free from any governmental pressure. Enhancement of its competence and capacity is our priority, including with regard to ensuring free and fair dispute settlement in Georgia. We are working on an Alternative Dispute Resolution mechanism in accordance to the best international practices. Here, the enhanced role of the business ombudsman should also be an effective supplementary measure. 7

8 Georgia maintains the favorable ranking records. In accordance to the Heritage Foundation Georgian economy scores the 21st freest in 2014 with improvements in 6 out of the 10 economic freedoms, in management of public finance, investment freedom, monetary freedom and property rights. Georgia is ranked 12 th out of 43 countries in the European region, and its score is well above the regional average. Not less importantly, the recent World Bank forecast for the economic growth in Georgia for 2014 is amounted to 6.3% instead of 5.0%. The Government s tax policy stipulates creation of an attractive and stable tax system for Georgian private sector and foreign investors. Simplification of tax administration, optimization of tax penalties, decriminalization of certain categories of economic violations have also been efficiently addressed. Taxation in Georgia is simple, low, efficient and fair: VAT-18%, Income tax 20%, Excise (different rates), Corporate income tax 15%, Property Tax -1% Income on Dividends and Interest, 5%, Customs Tax (0%, 5% and 12%) Transport Infrastructure Capacity Port capacity currently Poti 13 berth (New container berth should be constructed in 2014) Containers 4,5 mln. Tons Dry Bulk 2,0 mln. Tons Liquid Bulk 15 mln. Tons Depth of port 8-10 meter Operated by Maersk/RAKIA Batumi 5 berth and 1 offshore mooring Kulevi (Oil Terminal) Supsa (Oil Terminal) Containers Dry Bulk Liquid Bulk Depth of port Operated by Liquid bulk Operated by Liquid Bulk Operated by 0,9 mln. Tons 5,6 mln. Tons 2.0 mln. Tons 11 meter JSC KazTransOil 4,0 mln. Tons State Oil Company Azerbaijan (owner of the port) 6,2 mln. Tons BP 8

9 Future Deep-sea Port capacity (Anaklia) Min 2 berth with PanaMax capacity Containers 2.0 mln. Tons Dry Bulk 10.0 mln. Tons Liquid Bulk - -. Tons Depth of port 20 meter International airports: Tbilisi international airport utilization 1 million passengers (capacity: 3 million passengers per year) - Serving 28 destinations Batumi international airport utilization passengers (capacity: passengers per year) - Serving 6 destinations Kutaisi international airport utilization passengers (capacity: passengers per year) - Serving 7 destinations Cargo Transit through Georgia s territory Y Railway freight Shipment by Trucks tones tones tones tones Transport & Energy: Located at the crossroads of Europe, Central Asia and Middle East Georgia is the key link in the shortest transit route between Western Europe, Central Asia, China and India for transportation of oil and gas, capital and people. This favorable geographic location makes the country as a natural transportation and business hub in the region. Georgia as the transit gate to and from the Central Asia, South Caucasus, through Black Sea Region and Europe is an important component of TRACECA (Transport Corridor Europe- Caucasus-Asia) railroad and motorway networks. The main regional transit road from north to south and east to west goes across Georgia. Georgia is directly connected with the EU via Black sea ports in Ukraine (Ilyichevsk), Romania (Constantsa), Bulgaria (Varna) and Derince (Turkey). Georgia actively participates in a range of important regional and international projects and at the same time works for modernizing its domestic transport infrastructure and increasing its energy efficiency. 9

10 Regional infrastructure projects in Transport: The Baku-Tbilisi-Kars railway will establish a direct route between Georgia and Turkey and thus via Marmara tunnel will have direct connection from Europe via Turkey to Georgia and further to other TRACECA countries. Up to the recent period, 40% of the works has been done on the Georgian section. By the end of 2014, it is planned to make a test train passage. Completion of the project is planned in This railway route is the shortest and the most cost-effective route for reverse transit of the cargoes from Afghanistan. The Government of Afghanistan initiated the singing of the joint intergovernmental agreement between Georgia, Republic of Azerbaijan, Republic of Turkmenistan and Afghanistan on development of new transport corridor. The Silk Wind Multimodal Block Train project suggests to development the container transportation through railway from China via Kazakhstan, Azerbaijan, Georgia and Turkey and further to Europe and is expected to accelerate the delivery of goods from China to Europe and backwards. The Intergovernmental Agreement on the Block Train Project Silk Wind between Georgia, Republic of Azerbaijan, Republic of Turkey and Republic of Kazakhstan is planned to be signed in the nearest future. Another important priority of the Government of Georgia is the construction and rehabilitation of main E60 International Road - the East-West Highway in accordance with international standards. The World Bank, Asian Development Bank (ADB), Japanese International Cooperation Agency (JICA), European Investment Bank (EIB), Chinese Development Bank (CDB) and the European Bank for Reconstruction and Development make financial contribution to the project. Answering the growing demand on transit and logistic infrastructure the Government of Georgia is going to build a new deep seaport in Anaklia. Port shall be Consisting of 6 piers with total annual capacity TEU (20 foot equivalent unit). Total investment to be made is 492 million USD. Construction of a new international airport near Anaklia sea port is also part of the project. The airport is to have special freight transportation capacities. 10

11 Exciting Transport Infrastructure of Georgia: Road Seaports Airports 1,500 km Railway Poti seaport: Tbilisi international airport 13 berths; 8-10m draft Container and bulk (210k TEU) 1,500 km int. highway Batumi seaport: 20,000 km internal roads Kuhlevi seaport: 5 berths 1 offshore mooring; 11m draft 90% petroleum/oil, 10% containers (44k Crude oil, petroleum, and lubricants operated by State Oil Company of Azerbaijan Batumi international airport Kutaisi international airport for low-cost airlines Regional Infrastructure Projects in Energy: Georgia plays special role in diversification of energy supply routes and delivering hydrocarbons from Caspian Sea and beyond, to the European Market and contributing to the energy security of the South Caucasus region and the Europe. The Baku/Tbilisi/Ceyhan and Baku/Supsa oil pipelines, as well as Baku/Tbilisi/Erzurum gas pipeline are successfully delivering Caspian hydrocarbon resources to the west. On December 17, 2013, the Shah Deniz consortium announced the final investment decision (FID) for the Stage 2 development of the Shah Deniz field. It will expand the South Caucasus Pipeline through Azerbaijan and Georgia by Trans Anatolian Gas Pipeline (TANAP) across Turkey and Trans Adriatic Pipeline (TAP) across Greece, Albania and into Italy. Together these projects, as well as gas transmission infrastructure to Bulgaria, will create a new Southern Gas Corridor to Europe. This project will not only change the energy map, but will give customers in Europe direct access to the Caspian gas resources for the first time. 11

12 Timely launching of the Trans-Caspian gas pipeline that will transport natural gas from Kazakhstan and Turkmenistan to central Europe and the Azerbaijan-Georgia-Romania Interconnector Project (AGRI) that will transport the Caspian LNG resources to Romania, Hungary and Western Europe via Black Sea ports of Georgia bear particular importance for diversification of gas supply to the EU. Local projects in Energy Georgia has second richest hydro recourses per capita in the world and has huge potential to become net green electricity provider for the region. Georgia possesses a well- developed power transmission infrastructure, linking the country with all neighbours (Transmission line with Russia MW, Turkey MW, Armenia MW and Azerbaijan MW). Due to these transmission lines Georgia is well integrated into the regional power infrastructure. Hydropower Potential of Georgia: out of 26,000 rivers are significant in terms of energy Production; - So far only 20% of total hydro potential is utilized; - HPP Greenfield potential of 40 TWh; - Growing demand of neighboring as well as of European countries, including rapidly expandable Turkish market - by Turkey is expected to be a net importer of electricity. Construction of new high voltage 500/400 KV line connecting to Turkey has been finalized in The MOU for additional 154 KV line connecting to Turkey has also been signed; - 68 PP on-going Projects with total installed capacity of 2,500MW and annual generation up to 8.0 TWh - Projected investment USD 3.4 bln; - 80 HPP Projects at the Pre-Feasibility Study Level are open for investments; NOTE: Major companies operating in Georgia s energy sector (HPP): Peri (Georgia), Rusmetal (Georgia), Anadolu (Turkey), Ağaoğlu (Turkey), Trans Electrica Ltd.(India), Clean Energy Group (Norway), KGM (Turkey), Tata Group ( India). In Transport: For the Construction o f Marabda-Kartsakhi section (in total 180 km) of the Baku- Tbilisi-Kars Railway Azerbaijani side has allocated 200 million US Dollars (Annual 1% interest rate) and another 575 million US dollars (Annual 5% interest rate). The construction started in Works are implemented by the Marabda-Kartsakhi Railway LLC and by its general contractors: Azeriolservice JSC. 12

13 Tourism: Georgia is a Member of the International Tourism Organization (ITO) since : visitors. Growth + 57% : visitors. Growth + 22% Tourism is the one of the fast-growing sectors of Georgian economy. In 2013 the share of tourism in Gross Output of Country s economy amounted to 7.1% (preliminary data). Compared to the previous year, the total output of production in tourism related services increased by 9.5% and equaled to 2.9 billion GEL (approximately 1.65 billion U.S. dollars). - Unique biodiversity: subtropical marshes, semi-deserts, alpine zones and snowy peaks, all within hundred kilometers of each other; - More than historical and cultural monuments, four out of which are included in the list of UNESCO World Heritage Sites; - Over 103 resorts; - Around 2400 springs of mineral waters; - 8 national parks and 31 protected areas; Significant steps were taken towards travel facilitation and visa relaxation. According to UNWTO World Tourism Barometer in the first half of 2012 Georgia was on the first place in the world according to the growth of number of tourists (+54%), while the Lonely Planet's "Best value destinations" for 2013, ranked Georgia among the 10 top value destination countries. It is expected that supply of accommodation units will increase considerably to keep pace with demand. Tourism sector can offer number of investment opportunities, in particular for Seaside hotels, Mountain and alpine ski hotels (Location: Gudauri, Bakuriani and Svaneti regions), as well as Spa hotels (Location: Tskaltubo, Akhtala and Borjomi) target: At least 33,000 new jobs created by 2015; At least a 100% increase in the number of available rooms of an international standard. Main Macroeconomic Data of Georgia for 2014 GDP : GDP US$ bln. real growth rate +6.2%. GDP per capita US$ 3, : GDP US$ bln. real growth rate +3.2%. GDP per capita US$ 3, : Georgian government prediction +5%; World Bank prediction + 6.3%; 13

14 GDP structure in 2013 Trade: 17.3% Industry:17.2% Agriculture, forestry, transport and communication:10.7% Fishing: 9.3% Health & social work:5.8% Construction:6.7% Public Administration:10.1%\ Other Sectors:22.9% Inflation : Annual Inflation -1,6% ( 2013 January to 2012 January) : Annual Inflation 2.9% (2014 January to 2013 January) Unemployment : Unemployment rate was 15.0% (305 Thousand 0,1% drop from 2011) : Unemployment rate was 14.3% (according ILO data) Government Budget In 2014 Georgia s new 2014 State Budget was set at million GEL on December 11, 2013, with the General Government Budget revenues projected at 7,230.0 million GEL. 1 PI Percentage Change over Corresponding Month of Previous Year,% GDP Government Budget Deficit : Budget deficit towards GDP was 2.8%; : Budget deficit towards GDP was 2.7%; 14

15 External Debt : Total Public Debt to nominal GDP was 34.9% External Public Debt to nominal GDP was 27.6 % : Total Public Debt to nominal GDP was 34.5% (decreased by 0.4%) External Public Debt to nominal GDP was 27% (decreased by 0.6%). As of December 31, 2013, the Gross External debt amounted to 13.6 Billion USD (1% growth compared to the same period of the previous year). NOTE: The Public Debt data does not exceed 60 percent of GDP and, therefore, comply with the Maastricht Criteria, as well as the fiscal limits stipulated by the law of Georgia on Economic Liberty (Economic Liberty Act). Foreign Direct Investment : FDI amounted to 912 mln USD : FDI amounted to mln USD By sector: Energy-22%, Financial service-19%, Transport and Comunication-15%, Manufacturing-13%, Construction-6%, Mining-4%, Agriculture-3%, Other-18% By origin: Netherlands-20%, Luxemburg-16%, China-11%, Azerbaijan-10%, Turkey -8%, USA-6%, International Organizations-6%, UK-5%, Malta-5%, UAE-4%, Other-10%; Trade Turnover : US$ 10,220 bln. Growth % : US$ bln. Growth + 5.5% Export : Total export - US $ 2.38 bln. Growth + 8.6% : Total export - US$ 2.91 bln. Growth % Main Export Products: Motor cars, Ferro-alloys, Nuts, Copper ores and concentrates, Mineral/Chemical fertilizers, Wine of fresh grapes, Mineral water, Brandy, Gold, Bars and rods of iron or non-alloy steel. Main Export markets: Azerbaijan, Armenia, Ukraine, Russia, Turkey, USA, Kazakhstan, Canada, EU. Import : Total import - US $ 7.84 bln. Growth % 15

16 - 2013: Total import - US$ 7.88 bln. Growth + 0.4% Main Import Products: Petroleum and petroleum oils, Motor cars, Petroleum gases, Medicaments put up in measured doses, Wheat and meslin, Telephone sets, Copper ores and concentrates, Cigars, cigarettes, Automatic data processing machines, Motor vehicles for the transport of goods Main Import Source: Turkey, Azerbaijan, Ukraine, Russia, China, EU, Japan, USA Foreign Trade Trade Turnover with: Billion USD (January- February) * All countries Change ( y-o-y) 33.3% 10.5% 5.5% N/A Export Import EU Change ( y-o-y) 27% 27.5% 27% N/A Export Import CIS Change ( y-o-y) 32.6% 31.4% 35.2% N/A Export Import Russia Change ( y-o-y) 31% 22% 50% 38% Export Import USA Change ( y-o-y) 5.7% 12.8% -11.2% N/A Export Import Trade Turnover in 2012 CIS: 31.7% EU:27.2% Turkey:15% China:5.8% USA:4.3% India:0.9% Others:15.7% 16

17 Trade turnover in

18 FTAs with CIS countries and with Turkey (350 million customers); DCFTA with EU will be signed in June 2014 (about 500 million customers); FTA with USA is under consideration by the parties; GSP+ with EU products to the EU market duty free; GSP with USA (suspended), GSP with Norway, Switzerland is planned to resume this year; - Canada, Japan - lower tariffs are applied for 3400 goods exported from Georgia to these countries; - In Georgia 90 percent of goods are free of import tariffs (for the rest, 5%, and 12%); No quantitative restrictions for import. Banking Sector Bank system is one of the most stabile sectors of the Georgian economy. It has been maintaining stability throughout the years in times of the war with Russia and the Global financial crisis. Up until today the National Bank of Georgia limits itself to only minor interventions into monetary market and facilitates to maintaining favorable environment for bank operations in Georgia. Currently, there are 19 commercial banks in Georgia, including 14 foreign banks such as ProCredit Bank (Germany), VTB Bank Georgia (Russia), Bank Republic (France), Halyk Bank (Kazakhstan), Kor Standard Bank (UAE), Pasha Bank (Azerbaijan), Ziraat Bank (Turkey), International Bank of Azerbaijan (Azerbaijan) and others; as well as 5 Georgian banks: Bank of Georgia, TBC Bank, Cartu Bank, Liberty Bank, BTA Bank. All commercial banks are operating under the supervision of the National Bank of Georgia, as it is envisaged by the Articles 95 and 96 of the Constitution and the Organic law "On the National Bank." To ensure the stable functioning of the banking sector and minimize systemic risks, the NBG sets minimum regulatory capital requirements of 12 million USD for domestic banks and foreign bank branches. The mediator in the interbank transfers is also the National Bank of Georgia. In Georgia transfers are allowed only in the national currency (GEL); transfers in foreign currency are prohibited. Georgian Co-investment Fund The Georgian Co-Investment Fund ( GCF ) is a USD$6bn private investment fund, established in September The fund is managed by management company GCF Partners. The Fund will invest 25 75% of the total equity investment, with a minimum size of USD$5m. The Fund intends to allocate capital for investments in the following sectors and industries: 18

19 Energy up to USD$3bn Hospitality and Real Estate up to USD$1bn Agriculture and Logistics up to USD$0.5bn Manufacturing up to USD$1.5bn Other up to USD$0.5bn The Fund will focus on investing in the following categories of projects: Georgia s Agriculture: Import substitution opportunities (Dairy production; Pork & beef production); Export opportunities (Wine and mineral water; Fruits and vegetables); Storage and distribution infrastructure; processing plants; Greenhouses; Grain storage elevators; Animal feed production Energy & Infrastructure: Hydropower (Medium and large scale hydro projects; Greenfield and Brownfield); Coal (Proven reserves 400mln tones: Large scale mining/resource realization projects; Thermal Power projects > 300MW; Conventional coal resource commercialization); Transit infrastructure (Ports, Logistical infrastructure) Hospitality & Real Estate: Hotels located in Tbilisi; Seaside hotels; Mountain and alpine ski hotels; Spa hotels; Regional hotels; Various leisure, entertainment and commercial facilities Manufacturing: Import substitution projects Value chain integration Large industrial projects GCF s investor base includes: Dhabi Group, RAK Investment Authority, State Oil Fund of the Republic of Azerbaijan, Batumi Industrial Holdings Limited, Calik Holdings A.S, Milestone International Holdings Group Limited, Mr. Bidzina Ivanishvili, Mr. Alexander Mashkevich, Estate of Mr. Badri Patarkatsishvili and other investors. Approved Investments for the Projects The Georgian Co-Investment Fund ( GCF ) approved its first investments totaling $1.3bn in 11 projects across real estate, energy and agriculture. Hospitality and Real Estate projects Panorama Tbilisi project will unite four multifunctional centers (1.Sololaki Hills, 2.Sololaki Rise 3.Freedom Square, 4.Erekle II Square) in Tbilisi. 19

20 The total investment size of the project exceeds $0.5bn. The project will add to Tbilisi 270,000 m² of premium space, which includes hotels, serviced apartments, A-class office and commercial areas, exhibition and conference halls, health and leisure centers, sports arenas, pools and all the necessary infrastructure to make it a 24/7 tourist and business destination. We will see the first openings in approximately 2.5 year. Energy Projects Five hydroelectric power plants will be built in the South and the North-West of the country, with a combined total investment size of over $750m and the total annual expected energy capacity generation in the range of 2,000 GWh. In particular: - Mtkvari HPP is a Brownfield hydroelectric project located in the South Georgia, Akhaltsikhe Region, on river Mtkvari. Its planned capacity is 53.3 MW with GWh of annual energy generation. The project s total investment size is $100m; - Tskhenistskali Cascade of HPPs will be built in North-West Georgia, in the regions of Lentekhi and Tsageri, on river Tskhenistskali. The total installed capacity of HPPs will be 347 MW and the annual energy generation will equal to 1,744 GWh. The total anticipated investment size of the project is $679m. Agriculture Projects Dairy farm and processing plant will be developed in the West Georgia in cooperation with the leading Dutch dairy company The Friesien. The dairy farm is intended for 2,000 cows with the production capacity of 50 tons of milk per day. The project envisages creation of state of art milk collection and dairy processing facilities with the processing capacity 100 tons of milk per day. With its scale and quality the project will substitute 25% of dairy products imports to Georgia and create up to 400 permanent jobs. The project s total investment size is $45m; 10.4 Ha tomato greenhouse will be built in the East Georgia in collaboration with a leading French Greenhouse Company. With the planned annual production capacity of 4,500 tons (by year 2015) the greenhouse will substitute 30% of tomato imports to Georgia and create up to 100 jobs. The project s total investment size equals to $14.3m. Georgia s Free Industrial Zones: A Free Industrial Zone Companies in Georgia operate on the certificate of status issued by Georgian fiscal authorities. Up until today, 2 Free Industrial Zones operate in Georgia, Poti FIZ and Kutaisi FIZ. Operations permitted to a Free Industrial Zone Company include all operations permitted to a regular company with some exceptions that are outlined below: 20

21 Free Industrial Zone Company is liable: - Upon supply of goods to a Georgian registered taxpayer (except Free Industrial Zone Company) to pay tax at 4% of income received/receivable from such supply; - Upon purchase of goods from a Georgian registered taxpayer (except Free Industrial Zone Company) to pay tax at 4% of market value of purchased goods. Prohibited operations of a Free Industrial Zone Company include: supply of services to Georgian registered taxpayer (except Free Industrial Zone Company); purchase of services from a Georgian registered taxpayer (except Free Industrial Zone Company), except purchases of: - Security and/or property rental or lease services from an organizer and/or administrator of a Free Indusial Zone; - Transportation, communication, water supply, sewerage, audit and/or consulting services; - Financial operations and/or financial services by licensed financial institutions. - Fixed assets construction and installation services; A Free Industrial Zone Company benefits from tax exemptions: - Income of a Free Industrial Zone Company is exempted from corporate income tax; Interest and dividends paid by a Free Industrial Zone Company are not taxed at - source, and are not further included in total income of a receiver; Exempted from VAT taxation without the entitlement to credit upon supply of goods/services to another Free Industrial Zone Company; - Not obliged to withhold personal income tax upon salary payments to its resident employees; - Not liable to asses and pay RCVAT (Reverse Charge Value Added Tax). - Export is exempted from VAT with the entitlement to credit - Import of goods produced in a Free Industrial Zone into the customs territory of Georgia is exempted from import tax - Property, including land, located in a Free Industrial Zone is exempted from property tax - No carry back or carry forward of losses is allowed for a Free Industrial Zone company Thus a Free Industrial Zone Company can also benefit from these tax exemptions with respect to export, import of goods produced in a Free Industrial Zone and property located in a Free Industrial Zone. Nowadays, there are more than 120 foreign companies registered at Poti FIZ. Among them are companies from USA, Great Britain, United Arab Emirates, India, Ukraine and Iran, which are working in the fields of Agriculture, Processing, Light industry, Chemical industry and Cosmetics. 21

22 DCFTA: - The Association Agreement, including the Deep and Comprehensive Free Trade Area (DC FTA) offers elimination of tariff barriers as well as non-tariff barriers in trade with the EU and regulates the wide range of trade related issues (e.g. food safety, production security, competition policy, the intellectual property rights, customs administration, state procurement, etc.). The DCFTA implies approximation of the trade related legal framework and the institutions to the EU regulations and administrative structures. - Thus, the establishment of the Deep and Comprehensive Free Trade Area between Georgia and the EU will finalize the formation of the Georgian trade system compatible with the EU s requirements; - growth of Georgia s investment attractiveness; - diversification and expansion of the export markets for the Georgian products; - reduction of export related expenses; - protection of Intellectual Property Rights. - Following to the EU recommendations some issues have already been addressed: In Labor Relations amendments were introduced to the Labor Code, in line with the recommendations of the International Labor Organization (ILO). In Sanitary and Phytosanitary field the draft amendments to the Code on Food/Feed Safety, Veterinary and Plant Protection have been elaborated. Competition Policy draft amendments to the law on Free Trade and Competition have also been elaborated. - It has also been assessed that the DCFTA will contribute to the growth of the GDP, by 1,7 % in the short-term and by 4,3% in the long-term. It will increase Georgia s export by 9% and import by 4,4% in the short-term perspective, while in the long-term, the export will increase by 12% and the import by 7,5%.1 - As a result of the approximation in the areas of sanitary and phytosanitary measures and technical barriers to trade, the national systems of quality infrastructure for food safety will be established in Georgia, which is a key to ensure free export of Georgian agricultural and industrial products to the EU, as well as for supply of safe products to the domestic market. - The Georgian side has already reached an important agreement with the EU on tariff liberalization. As soon as the Agreement enters into force, the export of all goods of Georgian origin will be exempt from customs tariff. - The approximation to the EU Acquis in the area of public procurement will ensure maximum transparency of Georgia s procurement market. It will also provide Georgian suppliers and service providers the full access to the EU public procurement markets. - The EU renders an important assistance to Georgia. Close to 80 mln annually is allocated for technical assistance and expertise in implementing investment-related reforms through different instruments of Assistance (TWINNING, TAIEX, CIB, etc.) in areas such as food, safety, competition, public procurement, protection of Intellectual Property Rights, Customs, etc. 22

23 Economic Commissions Joint intergovernmental Commissions on trade and economic cooperation between Georgia and partner countries proved to be an important mechanism for taking stock of bilateral tradeeconomic relations, as well as effective and timely exchange of views on important issues of mutual interest. Georgia has the bilateral Economic Commission formats with: - EU countries: Austria, Czech Republic, Poland, Latvia, Lithuania, Romania, Bulgaria, Hungary; - Regional partners: Republic of Turkey, Republic of Azerbaijan, Republic of Armenia, Ukraine, Moldova, and Republic of Belarus, State of Israel, Arab Republic of Egypt; - Asian Countries: Peoples republic of China, Republic of India, Republic of Turkmenistan, Republic of Kazakhstan, Republic Uzbekistan. Georgia s Rural and Agriculture Development Fund: The Rural and Agricultural Development Fund was registered on January 22, 2013 as a nonprofit (non-entrepreneurial) legal entity. The fund is established without time-limit with the budget of approximately 1 billion USD. The highest governing body of the Fund is the Board. The goals of the Fund are: - Implementation of assistance programs for farmers, who possess small plots of land; - Development of rural infrastructure; - Cheap credits for agricultural production; - Co-funding of profit-oriented agricultural projects; - Introduction of modern technologies in agriculture; - Promotion of cooperatives in agricultural sector; - Establishment of an insurance mechanism; - Establishment of agricultural land fund and its consolidation. Financed Projects 1. Small Farmers Spring Activities Support projects In 2013, within the Small land owner farmers supporting project of Spring Activities Support Program of the Government of Georgia, the farmers, possessing up to 5 ha agricultural land (approximately 80% of farmers), have received agricultural cards. The cards enabled the farmers to purchase agricultural items and inventory, as well as services related to the cultivation of soil farmers received agricultural cards and approximately 200 mln GEL was allocated. 2. Preferential Agro-Credit Project consists of four components: a) Interest free commodity credit up to 5000 GEL for agricultural production means for 6 months for small scale farmers; 23

24 b) Preferential agro credit for average and large farmers from 5000 up to GEL for financing fixed assets and working capital for primary agricultural enterprises (maturity for credits on fixed assets is 60 months, for working capital 18 months). Interest rate applied by commercial institutions is 17% (max.), co-financing rate is 9%. c) Preferential agro credit for agricultural enterprises ranging from up to USD (maturity 84 months for the purpose of building and repairing agricultural buildings, purchase and installation of equipment, production of packing materials for agricultural producers, etc.) Interest rate applied by the financial institutions is 15%, co-financing rate is 12% of the applied interest. d) Preferential agro leasing for agricultural processing enterprises (maturity 84 months, benefit of the lesser does not exceed 15%, the lessee pays not more than 3%). Exports to Egypt 1000 USD Code Sum 21, , Ferroalloys 18, , Nuts Equipment for processing of rubber and plastic materials Special equipment and machinery Machinery and equipment for lifting, loading and unloading Incandescent and gas bulbs Oil vaseline and paraphines, High voltage (1000 and more) equipment and machinery Machunery for processing of paper and craft materials Ferilizers mineral and hemical,asotic 1, Other

25 Import from Egypt 1000 USD Code Item Name Sum 19, , Stuves for Heating and food processing 6, , Electic water heaters 1, , Machinery and equipment for lifting, loading and unloading , Washing machines 1, Citruces Rice Equipment for processing of rubber and plastic materials Refregerators Polimer materials Etiquetes from paper and craftpaper Furniture Medicals unpacked Printed products Wax organic Linen Paper,Cratpaper, cotton Metal Coils and sheets Animal liver Medicine 1, Metal processing machinery speare parts Vegetables Metal processing machinery Plastic wraping materials Wires isolated,cavles etc Liquid and poder disspensing equipment Ferroalloys Containers of paper, paperboard, cellulose fiber, cotton or canvas Furniture Seeds of anise, badian, fennel, coriander and other seeds Polyacetals, resins and other simple polyesters Incandescent and gas bulbs

26 7615 Kitchen production from alumine Other articles of iron or steel Special equipment and machinery Synthetic woven materials Metal construction Electic machinery and equipment Air conditioning equipment Sintetic fiber wovens Bulbs and lighting equipment Air compressors Measuring control equipment Potatous Onion, garlic and other vegetables Oil bitumine and others 1, Floor finishing from polimer matterial Glass Roundabouts, swings Others ,067.1 Mission s List of Participants - Eng. Motaz Raslan, Chairman, Raslan Group. - Mr. Mohamed Samir Brenjy, Vice President & CEO, Arab Company for Water Treatment and Bottling (Acwatab). - Mr. Mina Morcos Guirguis, Chairman, EBKOT for Development and Tourism Co. - Dr. Muhammad Zaher, President, Z-GOLD RESOURCES. - Mr. Ihab Youssef, President, Risk Free Egypt. - Ms. Rasha Kamal, Executive Director, Egyptian Council for Sustainable Development 26

27 Mission s Agenda 1. Meetings with Officials Ministry of Economy & Sustainable Development of Georgia, Ms. Ketevan Bochorishvili, Vice Minister Misnitry of Foreign Affairs of Georgia, Mr. Alexander Khvtisiashvili, Deputy Director of International Relations 2. Business Meetings Georgian Egyptian Chamber of Commerce Transcaucasus Crystal National Investment Agency Georgian Chamber of Commerce and Industry Georgia Partnership Fund Colliers International Georgia UBG (Universe Business Group)- United Water Supply of Georgia Georgian Industrial Group (GIG) Via Travel Aka Group Healthy Water Inc. Niba Invest GRDC Fast Plus 1 Georgian Industrial Group (GIG) Impexpharm Lozton Corporation 27

28 28

29 29

30 Second Destination: Armenia June 1 June 3 General Overview: Official name Capital Territory The Republic of Armenia Yerevan. Yerevan has more than 2,700 years of history and is considered to be the oldest capital, which is even 29 years older than the eternal city of Rome. 29,800 km2 Population Geography Climate Official language Over 3, 2ml., 98% of which are Armenians. Another 6 ml. Armenians live abroad. Armenia is located in the crossroads of Europe and Asia. The country is bordered by Turkey to the west, by Georgia to the north, by Azerbaijan to the east, by Nakhchivan to the south-west, and by Iran to the south. The terrain is mostly mountainous with numerous fast flowing rivers and forests. Armenia is rich in certain natural resources, semi-precious stones and mineral water springs. Armenia is an open air museum with more than 5000 historical monuments. In spite of small area the weather of different climatic zones can be observed in Armenia. The coldest month is January with the average daily temperature ranging between -13 C and 1 C and the hottest months are July and August with C in average. The state language is Armenian which forms a separate branch of the Indo-European language family and is considered to be the oldest one. Armenia has its own script, the Armenian alphabet created by Mesrop Mashtots back to AD. Religion Christianity. Christianity was officially adopted as a state religion in 301 AD. Time zone GMT+4 Government System Entrance to Armenia Armenia is a Presidential Parliamentary Democratic Republic. A simplified visa system for entry visas exists. It is possible also to acquire entry visa at the border crossing points of the Republic of Armenia (conventional visas) or electronically ( Usually entry visa is processed at the diplomatic missions and consular posts of the Republic of Armenia upon the completion of 3 working days. 30

31 Attractive Conditions for Investment: Investment promotion is one of the priorities for Armenian economic policy and is based on opendoor approach for foreign investments which is supported by Law on Foreign Investments and by the State Investment Policy Concept. The Republic of Armenia has the most open investment regimes among CIS countries. The Government of Armenia is carrying out comprehensive reforms in the field of business assuring favorable opportunities for foreign investors and businessmen. ARMENIA IN THE EYES OF INTERNATIONAL ORGANIZATIONS: Reforms affect the country's ranking scores. Thus, according to the Wall Street Journal and Heritage Foundation, Armenia s Index of Economic Freedom is 69,7 ( Moderately Free ), putting the country on the 36th place in the 2010 Index. Armenia is occupied 19th place among the 43 countries in Europe. According to the WB Doing Business 2011, Armenia is 48th among 183 countries. Another world-famous rating agency Fitch Rating has assigned the long-term "BB" rating to Armenia for the stability of foreign and national currencies. INSTANT REGISTRATION OF ENTERPRISES: "One-stop-shop" newly introduced system for registration of enterprises allows a company to be registered in 15 minutes by visiting a registry office, or by online regime ( with electronic signature. SIMPLIFIED CONSTRUCTION PERMITS: Administrative barriers for construction are significantly reduced. In particular, 137 days for obtaining construction permit have been replaced by only 27 days. SIMPLIFIED LICENSING PROCEDURES: 169 types of activities that were subject to licensing have been reduced or merged to 96, 12 out of which are subject to simple licensing, and the rest 84 are subject to complex licensing. A new electronic system to obtain licenses has been introduced ( At the same time, a number of the documents required for licensing has been also reduced. 31

32 GROWING ECONOMY AND STABLE MACROECONOMIC ENVIRONMENT: Before world financial crises, Armenia has been referred by the international organizations as the Caucasian Tiger, due to its double-digit economic growth rates. Being an open market economy, Armenia has overcome the consequences of the global economic crisis and has recorded growth in all sectors of economy. STABLE BANKING SYSTEM: The banking system is growing rapidly; it is stable and is in line with the best international standards. Stock market is represented by NASDAQ OMX Armenia OJSC, which is part of the NASDAQ OMX Group, Inc. international group. NASDAQ OMX Armenia is the member of the Federation of Euro-Asian Stock Exchanges (FEAS) and International Association of Exchanges of the Commonwealth of Independent States. The Central Bank of the Republic of Armenia has joined the Basel-2 international standards on banking regulation, which have been already introduced and is successfully applied in national banking system. PREFERENTIAL TRADE REGIMES: The Government has adopted a policy aimed at integration into the global economy and as a result a number of the following international agreements has been signed: 1. Membership to the World Trade Organization (since 2003) 2. Free trade agreements have been signed with majority of CIS countries; 3. Armenia benefits from the Generalized System of Preferences (GSP) of certain developed countries. Since December 9, 2008 Armenia is included in the list of countries enjoying "Generalized system of preferences" (GSP+) trade regime provided by the EU. It allows exporting over 6,400 products with zero or reduced customs duties to the EU market. In addition, Armenia currently enjoys "Generalized system of preferences" of the USA, Canada, Switzerland, Japan, and Norway. Both free trade agreements and generalized systems of preferences allow exporting goods to the markets of CIS, the EU, the USA, Canada, Switzerland, Japan, and Norway without customs duties and trade barriers. 32

33 Bilateral Treaties on Investment Promotion and Protection have been concluded with over 39 countries; 37 out of which are already ratified. Armenia is a member of the International Centre for Settlement of Investment Disputes and has signed the convention on "Settlement of Investment Disputes Among States and Nationals of other States", and "CIS multilateral convention on the protection of investor rights". FREE ECONOMIC ZONES: Tax legislation as well as the Law on Free economic zones grant companies acting in free economic zones certain exemptions on profit, income and property taxes, on VAT and customs duty obligations. IMPORT AND EXPORT REGULATIONS: Import regulations: Armenia uses the Harmonized Commodity Description and Coding System. 0% of customs duties are defined for import of capital goods and 0 and 10% for consumer products. There are no quotas, licensing requirements and quantitative restrictions on import. Export regulations: Armenia does not have any licensing requirement for export. There are neither export duties nor VAT payment obligations and limitations. TAX POLICY AND SIMPLIFIED ADMINISTRATION: The concept of "non-taxable threshold for VAT (58.35 million AMD/156 thousand US dollars) has been invested, and more simplified and preferential taxation mechanisms and profit tax (income tax) simplified calculations have been defined for the taxpayers, who haven`t exceeded this threshold. The VAT payments for import of some goods are postponed: (a) For one-year period, if the customs value of imported goods is less than 70 million AMD, (b) For two-year period, if the customs value of imported goods is 70 million AMD and more, (c) For three-year period, if the customs value of imported goods exceeds 300 million AMD. 33

34 The tax administration has been improved. In particular: The electronic reporting system is applied; The number of documents submitted to the tax authority is reduced; The mechanisms of registration of penalties in favor of the taxpayer in case of not returning the amounts of tax overpayments and amounts differing from overpayments to the state budget collected by the tax authority during the period prescribed by the law are introduced; The choice of verification of taxpayers is based on risk criteria; The return of overpayments (the difference from overpayment amounts) of VAT and excise tax for non-risky VAT taxpayers is done via automatic system; A two-level appeal system is formed in order to discuss and resolve the disputes that occur during the implementation of tax legislation. EMPLOYMENT RELATIONS: Armenia is a full member of International Labor Organization. The Labor Code corresponds to the international criteria and assures the protection of employer and employee rights, and is constantly updated reflecting the dynamic developments in the world. HIGHLY QUALIFIED, SKILLED AND EDUCATED WORKFORCE: The majority of Armenian workforce has professional education. Literacy rate of the population is 99%. The workforce is considered to be creative, with ambitions to obtain innovative knowledge modern skills, is easily trained and adaptive to new conditions. Many Armenians are fluent in foreign languages. The labor cost is highly competitive in comparison with other transition countries. STRONG DIASPORA: Although two third of Armenians live abroad they do play a significant role in the socioeconomic, educational and cultural life of Armenia. Being actively involved in the economic life of Armenia, the Diaspora is a key source for transfer of knowledge and innovations, establishment of trade relations and promotion of Armenian organizations into trade networks. 34

35 QUALITATIVE INFRASTRUCTURE AND TELECOMMUNICATIONS: Armenia is located at the crossroads of Asia and Europe and is bridge between these two continents. Due to implementation of large-scale infrastructure projects, Armenia serves as a link among Asian, Arabian, and European countries. Armenia enjoys a high quality road network which is constantly (yearly km) repaired and provides with secure and high-level connections with the neighbors. The construction of the highway connecting the north with the south will provide safe and quick movement of goods from the Persian Gulf countries to Europe and vice versa. Railroad network provides access to Black Sea ports (mainly to Batumi and Poti). In addition, Armenia-Iran railway is planned to be built. Telecommunication industry is marked by the presence of well-known mobile operators, which ensure high quality connection corresponding to the international standards. The whole area of the Republic of Armenia has an access to the internet; the internet is available via DialUp, DSL, radio and fiber-optic technologies, WiMAX communications and prepaid cards. Mobile operators provide fast and wireless internet connection opportunity via 3G and 4G systems. At present, the mentioned systems are available almost in all the regions of Armenia. The whole country is supplied with water, electricity, and gas. Stable energy and gas prices are competitive throughout the region (except oil producing countries). CURRENCY AND PAYMENTS: The national currency of Armenia is Armenian Dram (known by ISO standards as AMD). It was introduced on November 22, 1993 by the Central Bank of Armenia. The CBA runs a liberal monetary policy allowing floating exchange rates and free transfer of currency. Both the residents and non-residents may freely import and export foreign currency without restrictions, almost all the Armenian commercial banks have ATMs that accept MasterCard, Visa, ArCa, edram and other plastic cards. There is no limitation for free movement of the capital. 35

36 FOREIGN INVESTMENT INCENTIVES: The following investment benefits are in place: 1. Ownership: 100% ownership permitted. 2. Admission: There is no screening and no specific authorization for making an investment. 3. Land ownership: The companies registered by a foreigner in Armenia have the right to buy a land. Although foreign citizens are not allowed to own a land in Armenia, however they are offered a long-term lease contracts. 4. Import: The import of raw materials is tax free. In the framework of investment projects VAT payments for imported goods exceeding 300 ml. AMD are postponed for three years. 5. Export duties and restrictions: None. 6. Export VAT. Zero rating in Armenia applies to goods and services exported under Free Turnover and Reexportation customs regimes. 7. Investment guarantees. In case of any changes in the legislation, foreign investors can choose which Law to apply up to a five-year term (Five-year Grandfather Clause1) 1. Free Economic Zones. The companies acting in free economic zones are fully /for 100%/ relieved from income tax, VAT, and custom duties. While defining the taxable income of a taxpayer who is a free economic zone exploiter for a full year, the aggregate income is reduced by the amount of income received from activities carried in the free economic zone. 2. Exchange Control. There is free exchange of foreign currencies. 3. Remittance. No restrictions on remittances. 4. Staff Recruitment. No restrictions. 5. Location. No sectoral or geographical restrictions on investments. There are also some income tax and VAT privileges defined for resident organizations that have listed ordinary nominal stocks in stock exchanges operating on the territory of Armenia. Particularly, the mentioned organizations have a privilege of income tax reduction by 50%; moreover, the organizations that have listed stocks are reimbursed VAT payments for several services received on the territory of the Republic of Armenia for listing purposes paid to the providers of those services. It is also worth mentioning the statement made by the President of RA on granting privileges to the large-scale investment projects according to the relevant legal acts. 36

37 TAX RATE OVERVIEW: In Armenia 4 out of 8 taxes are state (income tax, profit tax, value added tax, and excise tax); moreover, fixed and licensing payments can be prescribed by law to substitute the above-mentioned taxes. The other 4 are local taxes (land tax, property tax, hotel tax, and parking tax); in addition, other local taxes can be prescribed by law, as well. Tax Rate Income tax 24,4-26% Profit tax max. 20% Value added tax 20% In Armenia individual property growth, dividends, wills and inheritance or donation properties are not taxed. In addition, a simplified tax system is applied towards SMEs. International air transportations through Zvartnots and Shirak airports of Armenia in 2013 Name of the Airport 1 Yerevan Zvartnots Airport 2 Gyumri Shirak Airport Departures Arrivals All All

38 Armenia/Egypt Export and Import country year period export import (countries import of origin) (consignment) Egypt Egypt Egypt Egypt Egypt Egypt Egypt Egypt Egypt Egypt Egypt Egypt Egypt

39 Armenia s Agenda Meetings with Officials Meeting with Armen Gevorgyan, Deputy Prime Minister, Minister of Territorial Administration of the Republic of Armenia Meeting with Karen Chshmaritian, Minister of Economy of the Republic of Armenia. Meeting with Sergey Avetisyan, Deputy Minister of Economy of the Republic of Armenia. Reception at the residence of the Egyptian Ambassador to Georgia and Armenia, Ambassador Mohamed Alaa El Leithy Business Meetings Chamber of Commerce and Industry of the Republic of Armenia The Union of Manufacturers and Businessmen (Employers) of Armenia The Armenian Development Agency (ADA) B2B meeting («Byurakn» program of LLC hotel complex) Visit to NatFood producing company. Visit to ARARAT JUICE factory. 39

40 40

41 41

42 Summary of Recommendations: Joint Rapport In response to ECSD s planned precedence, several common themes emerged from both countries officials, policy makers and think tanks. A direct flight from Egypt to these destinations is essential. The need of an Egyptian governmental commercial and political representation is needed if not an Egyptian Embassy then a General Consulate will help facilitate the growing bilateral business relations. In both countries administrations noted that they are keen on reforming their trade policy to adjust to how to interact with the rest of the world including Egypt. The trade mission will according to Georgia s and Armenia s analysts restructure their countries foreign trade strategy by exploring trade agreements, proposals and programs through evaluating their outcomes, growth beside their weakness where it is the Egyptian Government s role to provide extensive support packages for encouraging these countries direct investment to Egypt. The significance of Egypt to these countries and the importance of the relations development to uphold bilateral partnership ties with each country in the coming period. Officials in Georgia and Armenia highlighted the importance of Egypt in assisting to solve conflicts in the Middle East in addition to the importance of its strategic location as the hub of Africa and the Middle East. Members of the delegation felt the importance of organizing similar trade missions aiming at opening nontraditional markets before the Egyptian products to revitalize investments hence support Egyptian exports and raise growth rates. ECSD will work on establishing bonds of communications with similar promising markets to act as a catalyst for transformation in international trade and investment relations with Egypt. The meetings came out with a common recommendation which is the urge to organize a follow up mission to Georgia and Armenia to give greater impetus to the joined relations and build on what has been accomplished and achieved in May-June 2014 trade mission. ECSD Trade mission delegates extended their contacts in both countries and advanced the channels of communication with their deliberate alleys as confirmed by the significance and 42

43 number of meetings and the value of rapport between delegates and their counterparts in both countries. Eng. Motaz Raslan, Chairman of the Egyptian Council for Sustainable Development pointed out that the mission has successfully accomplished its deliberate objectives this year opening various business channels between the three countries which consequently will result in fostering investment, thus increasing trilateral trade. 43

44 44

45 45

46 46

47 47

48 48

49 49